When you trade a physical gold ETC your capital is at risk.
Is RMAU eligible for retail investors?
Yes. RMAU is traded on exchange and eligible for any retail investor.
Is RMAU eligible to ISA and SIPP accounts?
Yes. RMAU is an exchange traded commodity (ETC) listed on a recognised stock exchange. As such, it qualifies for investment through an ISA or a SIPP.
Is the product an eligible investment for a UCITS funds?
Yes. The securities are debt securities traded on a recognised stock exchange.
Also, unlike other investors, UCITS do not have the option of gold delivery for the redemption of securities. It is explicitly prohibited in the Base Prospectus.
UCITS funds should however satisfy themselves that RMAU is eligible for their fund. A more detailed FAQ on UCITS eligibility can be found here.
What is the legal nature of ETCs?
The securities are issued as debt securities by a special purpose vehicle and are not units in an authorised collective investment scheme. This structure is commonly referred to as an exchange traded commodity (ETC) and trades like an equity.
What fees are applicable to my investment in RMAU?
The cost of holding RMAU is fixed at 0.22% per annum which is deducted daily from the value of each RMAU. The fee is deducted by reducing the amount of gold backing each security (the “Metal Entitlement Per Security”) by a small amount every day.
Fees may apply to the redemption of the securities redeemed directly with the Issuer, as stated in the final terms. Please note that if you choose to redeem RMAU in exchange for gold, specific fees may apply as further explained below.
How do I invest in the product?
Most investors will invest through their broker, like they would trade any listed share.
Is there any credit risk on the Issuer?
There is virtually no credit risk. The Issuer holds gold in an amount of no less than the total Metal Entitlement (Metal Entitlement Per Security x Number of Securities Outstanding) in a segregated account. This account is secured and held in trust for the benefit of the securityholders. RMAU is backed 100% by physical gold in the form of LBMA Good Delivery bars in custody with The Royal Mint. Additionally, The Royal Mint covers the operating expenses of the Issuer.
Is there any credit risk on the Custodian?
Gold backing The Royal Mint Responsibly Sourced Physical Gold ETC is held in custody at The Royal Mint, a limited company wholly owned by Her Majesty’s Treasury. Gold is kept in an allocated account at all times, except for small amounts for no more than 24 hours which are de-allocated to satisfy redemptions. Allocated gold is not commingled with the Custodian’s assets and are kept separate and recorded as the Issuer’s assets and specific to RMAU. An allocated gold bar list is available daily on the Issuer’s website and details the bars backing the issue.
In the unlikely event that The Royal Mint became bankrupt, and some gold was held in unallocated form, the Issuer would have a claim against The Royal Mint.
The Issuer only holds physical gold to back the ETCs and never any cash.
Is there any credit risk on HANetf Limited?
HANetf Limited acts solely as manager and distributor of the ETC. If it were to cease activity or become insolvent, it could be replaced. Thus, there is no credit risk on HANetf Limited.
Is my investment secure?
Each ETC issued is backed 100% by physical gold held in custody accounts with The Royal Mint. Gold is held in an allocated account, which means that the Issuer has an entitlement to specific bars which carry no credit risk. The complete list of bars held by the ETC is made available every day on the fund page.
How do I know that enough gold is backing all ETCs at all times?
The precise identification of all bars held in Custody to back all ETCs is accessible to the public on the Issuer’s website. It includes a description of the total number of bars, the identification number of each bar, their year of production, refiner, their weight, fineness (purity), and also the exact fine gold content. When the Issuer receives a subscription to issue more ETCs, the Issuer does not issue the new ETCs until the Custodian and Administrator have confirmed that all the gold has been allocated. In the case of redemptions, the Custodian will not return any gold to an Authorised Participant until the Administrator has confirmed to the Custodian that the AP has returned the ETCs back to the Issuer for cancellation. The total amount of gold held, number of securities outstanding, the Metal Entitlement Per Security is available on the Issuer’s website daily.
In addition, the Issuer will generally always hold more gold than needed to back every ETC because the Custodian will “top up” any residual amount of gold to ensure only whole gold allocated bars are held on behalf on investors. This is defined in the Prospectus as Over Allocated Gold.
The Issuer will also arrange for two gold audits of the Custodian’s storage facility by an independent and experienced vault inspector.
All the bars held are LBMA good delivery bars and we also endeavour to always hold bars that meet the LBMA responsible sourcing programme.
What is responsible sourcing?
The London Bullion Market Association has established since 2012 a code of practice to encourage the gold supply chain to adopt sustainable standards of extraction and production. It implements the recommendations of the OECD Due Diligence for Responsible Chains of Minerals from Conflict Affected and High Risk Areas with respect to human rights and avoiding contribution to conflict. The standards are regularly improved and require refiners to be audited annually and issue public reports. More details can be found on the LBMA website here.
Where is the gold stored?
The Gold is held in The Royal Mint’s vaults in Wales. To manage redemptions, sometimes there may be a small amount of gold held in London in the LBMA custody network as this is the market standard location for gold delivery. The amount of gold in London is kept to a minimum.
Who is the trustee? What roles does it perform?
The Trustee is The Law Debenture Trust Corporation p.l.c., an independent entity whose role is to represent the interests of the securityholders. The trustee holds rights to the assets on their behalf. The trustee also acts as security trustee and, as such would be in charge of enforcing the security interest over the gold in the unlikely case of an Issuer bankruptcy.
What does limited recourse vehicle mean?
The Securityholders only have recourse to the secured property of The Royal Mint Responsibly Sourced Physical Gold ETC Securities (the “Class”). The ETC is 100% backed by gold and bankruptcy remote. In the event that the assets of a Class were not sufficient to cover all outstanding claims, there would be no other assets to cover the shortfall, and any outstanding claims would be extinguished.
Another feature is that the assets backing the Class are entirely segregated. This means that in the case other classes were to be listed in future, then Securityholders in one class could only claim against the relevant class, making each class entirely separate from other classes.
Can I redeem my RMAU in exchange or gold?
Aside from selling your RMAU securities for cash on a stock exchange, securityholders may redeem their securities directly from the Issuer for gold. Redemption fees may be applicable.
UCITS funds are prohibited to have their securities redeemed for gold at all times.